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FRACTIONAL DIFFERENCING MODELING AND FORECASTING OF EUROCURRENCY DEPOSIT RATES
Author(s) -
Barkoulas John T.,
Baum Christopher F.
Publication year - 1997
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1997.tb00254.x
Subject(s) - econometrics , benchmark (surveying) , term (time) , series (stratigraphy) , economics , sample (material) , german , history , geology , paleontology , chemistry , physics , geodesy , archaeology , chromatography , quantum mechanics
Using the spectral regression method, we test for long‐term stochastic memory in three‐ and six‐month daily returns series of Eurocurrency deposits denominated in major currencies. Significant evidence of positive long‐term dependence is found in several Eurocurrency returns series. Compared with benchmark linear models, the estimated fractional models result in dramatic out‐of‐sample forecasting improvements over longer horizons for the Eurocurrency deposits denominated in German marks, Swiss francs, and Japanese yen.